CFOAM (ASX: CFO) has secured its first order for its carbon foam panels from Touchstone Research Laboratory, with the panels to be installed in a US Navy destroyer vessel at the beginning of next year.

CFOAM says it expects the destroyer to undergo final sea-trials during 2019 which will validate the use of the CFOAM materials-based system in “real-world” sea-trial conditions.

Successful trials will pave the way for “all future ship retrofits and new vessel construction,” CFOAM said. The Australian engineering company said it anticipates that additional orders of its products will then start “ramping-up materially in the later part of 2019”.

CFOAM is an inorganic carbon material that is manufactured from coal, pitch or lignin feedstock but with superior properties that are attractive within composite tooling for the aerospace sector, energy absorbing applications and defence applications.

Retrofitting modern technology

The Arleigh Burke class of destroyers are relatively modern vessels used by the US Navy first built in 1988 with extensive radar capabilities allowing them to detect both seafaring vessels and aircraft with the ability to track and guide weapons to destroy enemy targets.

The fleet is currently undergoing modernisation with CFOAM’s carbon panels identified as one of the many improvements that can extend the fleet’s operational time.

CFOAM’s carbon-based technology is able to deliver various improvements to current metallic exhaust uptake systems that are “plagued by corrosion and require extensive maintenance and repair”.

A new proprietary uptake system has been developed by Touchstone over a 10-year partnership with the US Navy with CFOAM’s panels forming a key part.

According to Touchstone, its proprietary system has successfully met and exceeded multiple stringent test requirements and has emerged as the technology to be considered as a potential permanent fleet-wide replacement for the incumbent metallic exhaust systems.

Touchstone’s new exhaust system is expected to add corrosion resistance, structural capability, thermal isolation, and acoustic dampening to the system with significant weight advantages.

Destroying outdated technology

The series of vessels are used by several countries including Australia and are named after Admiral Arleigh Albert Burke, a distinguished US Navy admiral from World War 2 and the Korean War and served during both the Eisenhower and Kennedy administrations.

In April this year, the US Navy decided to keep all of its Arleigh Burke-class destroyers in service for a further 45 years thereby extending the life of the entire class.

The Deputy Chief of Naval Operations for Warfare Systems, vice admiral Bill Merz, said that the move would allow the US Navy to reach a 355-ship fleet by the year 2037.

Keeping each hull in the fleet for a 45-year service life equates to an extension of 5-10 years for each vessel and CFOAM’s carbon panels have been earmarked as a contributor to the lengthening of this service life following successful sea-trials of Touchstone’s CFOAM carbon foam-based exhaust uptake system.

The most recently commissioned Arleigh Burke vessels were awarded in mid-2011 and came with an average cost of around US$1.85 billion per vessel. A successful deployment of CFOAM carbon foam across an entire vessel’s exhaust-uptake system equates to around 3,000 cubic feet and carries a cost of around US$1 million per vessel – merely 0.05% of the total vessel cost.

Therefore, installing CFOAM’s panels is seen as a small price to pay to significantly extend the life of the service fleet and facilitate a range of operational improvements at the same time. CFOAM also foresees additional potential with its panels potentially being used in the US Navy’s most-recent Zumwalt-class destroyers.

“While we had little doubt about this program becoming a source of demand for CFOAM Carbon Foam eventually, we are very pleased to have now received this first CFOAM products order from Touchstone as it pertains to an important application that will become a key contributor to our upcoming Phase 2 expansion program,” said Alain Bouruet-Aubertot, executive director and CEO of CFOAM.

He added that “this announcement also underscores the synergistic benefits of the close working relationship between Touchstone and CFO. Because of its knowledge of the properties and performance of CFOAM products, Touchstone has the capability to develop new proprietary systems that, in turn, become important sources of demonstrable demand for CFOAM products.”

Today’s news helped CFOAM shares to reach a high of $0.28 in this morning’s trading session and were trading at $0.22 in the early afternoon, up almost 40% for the day before going into suspension pending an ASX query.

June 15th UPDATE:

CFOAM has updated the market following the suspension of its shares yesterday under ASX listing rule 17.3, but has declined an opportunity to comment on its sudden ASX suspension.

The company clarified that the commercial value of its deal with Touchstone was worth a mere $12,825, thereby cooling expectations that its carbon foam panels could soon be installed in substantial quantities across an entire fleet of vessels.

CFOAM also reiterated that its carbon foam panels must still undergo “final sea trials” next year which are likely to affect the commercial value of its deal with Touchstone.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.

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